A consumer has an income of $400 and is deciding between two products: X and Y. Assume that the X product is the horizontal axis product. The price of X is $10 and the price of Y is $2. Assume the consumer currently wants to consume 50 units of product Y to maximize his utility. a) Write out the equation to this consumers budget line. What is the slope to this budget constraint? b) How much of X and Y will the consumer consume to maximize his utility subject to his budget constraint. C) Now assume the price of X changes to $5 and price of Y and Income stays the same. At the new price, the consumer wants to buy 60 units of product X to maximize her utility given her budget How much X and Y will the consumer consume to maximize utility. S the before and after the change of the budget constraint and indifference gra on the same graph space. Show all necessary points. Label clearly. s. Draw d) Write out the expression of the utiity maximizing ruie here.?
A consumer has an income of $400 and is deciding between two products: X and Y. Assume that the X product is the horizontal axis product. The price of X is $10 and the price of Y is $2. Assume the consumer currently wants to consume 50 units of product Y to maximize his utility. a) Write out the equation to this consumers budget line. What is the slope to this budget constraint? b) How much of X and Y will the consumer consume to maximize his utility subject to his budget constraint. C) Now assume the price of X changes to $5 and price of Y and Income stays the same. At the new price, the consumer wants to buy 60 units of product X to maximize her utility given her budget How much X and Y will the consumer consume to maximize utility. S the before and after the change of the budget constraint and indifference gra on the same graph space. Show all necessary points. Label clearly. s. Draw d) Write out the expression of the utiity maximizing ruie here.?
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:A consumer has an income of $400 and is deciding between two products: X and Y.
Assume that the X product is the horizontal axis product. The price of X is $10 and
the price of Y is $2. Assume the consumer currently wants to consume 50 units of
product Y to maximize his utility.
a) Write out the equation to this consumers budget line. What is the slope to this
budget constraint?
b) How much of X and Y will the consumer consume to maximize his utility subject
to his budget constraint.
C) Now assume the price of X changes to $5 and price of Y and Income stays the
same. At the new price, the consumer wants to buy 60 units of product X to
maximize her utility given her budget How much X and Y will the consumer
consume to maximize utility. S
the before and after the change of the budget constraint and indifference gra on
the same graph space. Show all necessary points. Label clearly.
s. Draw
d) Write out the expression of the utiity maximizing ruie here.?
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